In baseball, TV's future is at the gates – but it'll take a lot to break through

When news broke that Major League Baseball had worked out a deal expanding the streaming of games within local markets, fans celebrated. These things happen when changes are made there, as advancement by Major League Baseball in this area is, perhaps, the change most desired by their product's consumers.

But this, a deal between MLB Advanced Media and Fox Sports, is not that. It's change, but not really. For the fourteen teams who broadcast their games on channels run by FOX, their fans can now stream their games inside the team's TV market—if they have cable, and if they have that channel.

Fans can switch the game off on the television, grab the iPad and a beer and head to the front porch. That's about it. Sounds nice, but it isn't the revolutionary change most are hoping for because, again, you'll still need cable if, for nothing else, just to prove you bought it.

So all this talk of blackouts ending is ultimately premature. Some blackouts will end, but not the ones that matter. And it's the larger blackouts—the ones that prevent the young urbanite crowd and others from streaming games within the cities where they reside—for which MLB and MLB Advanced Media face the most derision.

"They just don't get it," some proclaim. The problem is, they do "get it." They get it damn well.

The entity holding all the keys, the aforementioned MLB Advanced Media, proves as much—just, usually, behind the curtains.

The Tech

In 2011, entrepreneur and renowned technologist Marc Andreessen wrote a Wall Street Journal op-ed titled "Why Software Is Eating the World." In the widely-cited piece, he wrote:

More and more major businesses and industries are being run on software and delivered as online services—from movies to agriculture to national defense. Many of the winners are Silicon Valley-style entrepreneurial technology companies that are invading and overturning established industry structures. Over the next 10 years, I expect many more industries to be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not.

MLB Advanced Media, at its core, is a software company. Well, technically, it's the very popular software as a service model we're seeing bring immense success to a number of companies.

At an event at Safeco Field towards the end of the 2013 season, outgoing commissioner Bud Selig—who himself is proud of the fact that he doesn't use a computer and has never sent an email—called BAM, as its known, the largest startup outside Silicon Valley. He quipped that there was a running joke where wealthy individuals wanted to buy a team just so they could get a piece of what will soon, as per a superb piece from The Verge outlining the entity's growth, be its own company worth north of $5 billion.

They got there quietly, but for what was a long time a behind-the scenes operation, we're hearing more and more about just how much BAM powers. Even if you've never become a paid subscriber of MLB.tv, the service most associate with BAM, you've likely been on the consumer end of their software.

If you've ever streamed the NCAA Tournament using CBS' March Madness on Demand site, that's them. If you used WatchESPN to stream World Cup games or anything else, that's them. If you use HBO GO or their recently-launched a la carte product, HBO NOW, to watch some Game of Thrones, that's them. If you're a wrestling fan and pay for the WWE Network, that's them. If you use PlayStation Vue, that's them.

Yes, Major League Baseball—Major League Baseball—the league so many view as stale and catering to millions of 65-year-old white dudes, is the tech disrupter paving the way for the future of television. People talk about them leaving money on the table with their lack of local non-cable streaming, but they're already making so much money off streaming it isn't an issue.

And while the aforementioned client list and ensuing body of work is impressive, their recent partnership with the NHL forges the way for something new. Here's how the deal and the motivation for it was described in that article on The Verge.

"When you have HBO going over the top and Bob Iger’s talking about ESPN going over the top, Viacom’s networks are being kicked off cable, we had a real gut check," says John Collins, the NHL’s chief operating officer. "BAM can help us dictate what happens to our content in a time when this media landscape is going through a lot of change."

Like the deal with HBO, BAM will power the league’s streaming services. But the deal goes even further — BAM will be a rights holder of NHL content they can package and sell to an online audience. "It’s groundbreaking to have two leagues doing a rights deal," says Collins. BAM recently forged a similar arrangement with the PGA. The new approach moves BAM beyond just a white label service provider, putting them in position to become an ESPN of the internet age, competing against the likes of Netflix, Hulu, and Amazon with the one thing all those services lack: live sports.

For those who don't know, the idea of going "over the top" is to bypass traditional television models completely—namely, cable. It's interesting that the NHL COO raises that here as, if the league were to fully go that route, it would give BAM its second real look at an a la carte offering, with HBO Now being the other.

Now, I should say that BAM does go 'over the top' in a way already, with MLB.tv. It does deliver content directly to consumers, but not if they live within their team's local television market—and until then, fans will have their justifiable complaints.

The Issues

The thing is, more than any other sport, baseball is so tied to cable. Technologically, they could make the jump quite easily, if they'd even need to. But archaic economics are holding them back.

Remember, there are so many teams in the sport who recently signed enormous local cable rights deals that span decades. Those, in addition to the lavish national cable deals with ESPN and FOX, have pushed revenues, payrolls and franchise valuations through the roof. Understandably, baseball hasn't been quick to reshape its service such that it would cannibalize a—the?—top revenue source.

Then, even beyond the teams who signed their deals and make their money no matter what, there are organizations like the Mariners, whose 55 percent ownership stake in ROOT Sports—beyond the estimated $115 per year—gives them skin in the game.

Their deal running through 2030, which we understand very little about (how does a team get paid for buying something? How is there a time limit on their ownership?), surely has them hoping ratings don't crater so the the network (ROOT) can continue to charge providers (Comcast, DirecTV, etc.) high fees to carry it—as live in-market sports are the only thing cable can lord over services like Netlix.

There's a snag here though: ratings could already be slipping—or, more specifically, subscribers are already slipping. I'm not talking about the Mariners' specifically, but cable as a whole. Much has been written in recent months about how ESPN has been bleeding subscribers over the past year, causing a steep decline in Disney's stock.

What hasn't been mentioned, at all, is how ESPN is on many of the same cable bundles as your ROOT Sports NW,  Fox Sports SW, NASNs and whatever else. If ESPN is hemorrhaging subscribers, then these RSNs are too—and that could be an issue that needs to be addressed soon. For teams who are locked in to receive their checks until we're all being driven around by our cars, it might not be. But for teams who own a a channel, it is.

Problem is, solutions aren't easy. They must be made league-wide. BAM owns all teams' digital rights. The Mariners can't, for example, decide they're going to stream their games in-market on their own.

It's the same reason all teams' websites are the same, and the ensuing stifling of innovation among teams is one of the biggest drawbacks of the BAM model. Where, in other sports, you'll see teams toy with Soundcloud accounts with radio calls and online studio shows, baseball teams' hands are tied to strict MLB policies regarding what can be uploaded—and where.

But, more pertinent to this subject, digital rights have to be sold in bundles. That's why you see the recent FOX deal sending all those teams' rights away, and each team getting paid the same amount. If baseball were to click off the blackouts, really revolutionizing sports television, would that work? It's unlikely, as for better or worse, the Mariners shouldn't be paid the same for digital broadcast rights as the Yankees—or the Rays.

But that's a question for the future, when baseball and BAM decide they're ready to make a major move. Before then, what major move could they be talked into?

The Dream

Now this is where I get carried away.

As standalone products, MLB.tv and now NHL's digital offering don't have mass appeal. They serve a utility, absolutely, but they aren't a must-have for the average American sports fan. That's two of the four major American sports (plus golf), but not quite there. Though, if they got one more, they might have something. So, an idea.

Major League Baseball Media should go after the NBA's digital rights—and hard. Those rights are currently owned by Turner Broadcasting, and there's no knowing when that digital deal expires, and no reason for Turner to give them up. But if BAM were to obtain them—perhaps through nothing but shear capital—they'd truly be on the doorstep of becoming "ESPN of the internet age."

Look back at the new NHL deal, and BAM's existing setup—where they're not only a streaming service, but a rightsholder that can deliver the product as it deems fit (in partnership with the league, of course). In additional to the digital rights, BAM will also run NHL Network and all that comes with it, similar to their existing MLB Network. They've shown they're capable of running a full-fledged channel.

So, the idea—with three of the four major sports, BAM could beat cable at its own game: bundling.

Where MLB.tv, NHL GameCenter and NBA Gametime aren't, individually, a necessity for everyone, a service that provided all the non-national games for each—plus regular studio shows—beamed right to your XBox, Playstation, Roku, iPhone and iPad damn well would be.

You're missing the NFL, yes, but all local games are on broadcast television anyway. With a digital antenna—something that could in the future be included inside TVs—fans can watch their home team in HD for free anyway.

It is absolutely far-fetched, and unlikely, but that's the type of thing that could bring in the type of revenues that could lure owners into turning their backs on the lavish cable deals.

****

Major League Baseball is on the cusp of something big—while simultaneously already having something big. By being the best in sports at both streaming and reaping the rewards of archaic cable economics, they're having their cake and eating it too.

But their software has them poised to do a lot more.

They will always be out to make money—as any business should. But in today's tech economy, it's becoming increasingly important to cater to exactly what consumers want. When they chose to make the move, Major Leaugue Baseball is more than capable of doing so.